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having an available surplus of profit had to pay to its employees bonus which would in no case be less than an amount equivalent to 4.8% of basic wages earned during the year; nor was it to exceed an amount equivalent to 25% of the basic wages earned during the year. It was also provided that in case the available surplus was more than sufficient for granting bonus at a higher figure than the ceiling of twenty five per centum of basic wages earned during the year and the maximum bonus of 25 per centum was paid, such a mill would be deemed to have set aside a part of the residue of available surplus after grant of maximum bonus not exceeding 25 per cent. of the basic wages earned during the year as a reserve for bonus for purposes of "set on" (adjustment) in subsequent years. Secondly it was provided that where in the case of a mill, the available surplus was not more than the ceiling of 25 per cent. of basic wages fixed for bonus, the bonus would be fixed after deducting at least Rs. 10,000 from the available surplus. Further it was provided that if a mill had an available surplus of profits which would suffice to pay bonus at a rate lower than the minimum of 4.8 per cent. it would pay the minimum and would be entitled to set off the excess amount thus paid against the available surplus in a subsequent year or years and there were provisions how this set-off would be worked out. Lastly it was provided that if the profits of a mill were not sufficient to provide for all prior charges as mentioned above, though it had made profits, or where the mill had actually suffered a loss, such a mill would a& a special case for creating goodwill among its workers and for continuing peace in the industry but without creating a precedent pay to its employees the minimum bonus equivalent to 4.8 per cent. of the basic wages but would be entitled to set off this amount towards any available surplus in any subsequent years, subject, however, always to a payment of a minimum bonus at the rate of 4.8 per cent. of basic wages earned during the year. It has been contended on behalf of the appellants that the formula under the Agreement departs in some vital aspects from what is known as the Full Bench formula evolved by the Labour Appellate Tribunal in The Mill-owners' Association, Bombay v. The Bashtriya Mill Mazdoor Sangh (1), which has been approved by this Court in the Associated Cement Companies' case (2) and is thus the law of the land so far as bonus is concerned. It is urged therefore that inasmuch as the formula under the Agreement departs from the Full-Bench formula which is now the law of the land, it was not open to the industrial court to extend the Agreement in the face of the decision of this Court in Associated Cement Companies' case(1) and in so far as the industrial court has done so it has gone against the law relating to bonus and therefore the award should be set aside.

(1) [1959] S.C.R. 925.

It was executed on June 27, 1955, to cover a period of five years from 1953 to 1957, inclusive of both years, for grant of bonus to the employees of the Cotton Textile Mills of Ahmedabad. The object of the agreement was to create good will among the workers and for the purpose of maintaining peace in the industry. The basis of the agreement was that it applied for the entire Ahmedabad Textile Industry and for a period of five years. The "available surplus" of each mill was ascertained in accordance with the Full Bench Formula laid down by the Labour Appellate Tribunal in Mill- Owners' Association, Bombay v. The Rashtriya Mill Mazdoor Sangh, Bombay (1). The maximum bonus payable by every mill of the said area was fixed at 25 per cent. of the total basic wages earned during the year, and the minimum was fixed at 4.8 per cent. of the said basic wages. If in a particular year a mill had an "available surplus" adequate for granting bonus at a higher quantum than the ceiling of 25 per cent. of the basic wages. it would nationally set aside the part of the residue of the "available surplus"

after the grant of the maximum bonus not exceeding an amount equivalent to 25 per cent. of the basic wages earned during that year as a reserve for bonus for the purpose of "set-on"

(adjustment) in subsequent years. If the "available surplus" was adequate only to grant bonus at a rate lower than the ceiling, the quantum of bonus would be fixed in such a manner that there would remain with the mill at least a minimum of Rs. 10,000. If in respect of any year a mill had an "available surplus" adequate to pay bonus at a rate lower than the minimum rate, it would be entitled to "set- off" the excess amount of bonus that would be payable in a subsequent year or years. In setting off the said amount of bonus that, would be payable against subsequent year or years, if the surplus was adequate only to grant bonus at a rate lower than the maximum rate, the mill would first set aside out of the "available surplus" an amount of Rs. 10,000 and, then out of the balance, it would further take out the excess amount paid by it as bonus in the previous (1) [1950] 2 L.L.J. 247.

Does the impugned pact contravene the law laid down by this Court? It is contended that it infringes the law mainly in three respects, namely, (i) bonus was payable thereunder by a mill incurring loss; (ii) the pact did not provide for rehabilitation of the post-1947 block; and (iii) the depreciation and the interest on the reserves allowed were not in accordance with the formula.

The first objection appears to be plausible and has also been upheld by my learned brethren. But, in my view, there is a fallacy underlying it. The contention invokes the law of bonus laid down in respect of an industrial claim for bonus for a particular year made by the employees of a single mill and seeks to apply it to a case of an agreement evolving a scheme of bonus on the basis of industry-cum- region spread over a reasonable period of time. Though the fundamental principle, namely, that bonus is linked with profits, applies to both, the application of the same to two different situations must necessarily differ. The short question is whether under the impugned agreement the claim for bonus was not based on profits. The agreement was a multilateral one involving mutual obligations. It was on industry-cum-region basis, that is, it was entered into between the employers of the entire industry and the employees thereof. The basis of the agreement was that the entire industry would make a profit. For the purpose of convenient payment of bonus it was worked out on the unit basis. All the parties to the agreement, the employers and the employees of different mills in Ahmedabad, desired in- dustrial peace in order to build up the textile industry. The industry comprised many units with varying prospects and different strata of financial stability and prosperity. Some mills may earn profits throughout the period, some may earn profits in some years and incur loss in other years and under extremely unfortunate and unexpected circumstances, a mill may incur loss throughout. Though a,particular mill may earn abnormal profits, another mill may be just able to make its both ends meet and another may have a narrow margin of profits or even incur loss. But all of them were sincerely interested in the general prosperity of the industry as a whole in the said area which would have its repercussions on individual units. A mill which earns large profits may have to pay more than 25 per cent. of basic wages for the year as bonus and a mill which incurs loss may not have to pay bonus at all. The employees of a particular mill may be entitled in a particular year, having regard to the profits, to get bonus far in excess of 25 per cent. of the basic wages. But in the general interest of all concerned, they were all willing to make a little sacrifice for the common good. Each mill undertook the liability to pay bonus to its employees with a minimum and maximum limits in consideration of a similar undertaking of liability by other mills. So too, the employees, in consideration of a minimum bonus being guaranteed to them, agreed not to claim more than the maximum fixed and the mills as a whole guaranteed payment of the minimum bonus. But what is important to remember is that the entire scheme of payment of bonus was linked with profits. It would be paid on the basis of profits earned or to be earned by a mill. If a mill did not make profits in a particular year, bonus would be paid on account to be adjusted in subsequent years. The formula of "set-on" and "set-off" emphasizes the integral connection between bonus and profits, and the fact that the total loss incurred by a particular mill during the entire period may break that formula does not affect the basis of the agreement. In effect and substance, under the agreement, each of the mills agreed for a consideration on the happening of a contingency to treat certain amounts as notional profits adequate to pay the minimum bonus with a right to "set-off" in subsequent years against larger profits, if any, earned by them. In the premises, it is not correct to state that bonus is not linked with profits for four reasons, namely, (i) the agreement was between the employers and employees of the entire textile industry in Ahmedabad; (ii) the basis of the agreement was that the industry as a whole would make a profit; there is nothing illegal in parties to the agreement, who had ,intimate knowledge of the financial position of the entire industry, from accepting that position; (iii) instead of the profits of the entire industry being ascertained and bonus paid to all the employees, under the agreement, each mill for a consideration, namely, obligations undertaken by other parties, agreed to pay bonus ranging between a maximum and a minimum; and (iv) each mill also agreed for a consideration, even if in fact it incurred a loss in a particular year., to set apart a notional amount as profits adequate to pay the minimum bonus with a right to readjust its bonus account in subsequent years. In this view the impugned pact does not contravene the law of the land for the simple reason that there is no decision of this Court which prevents the making of ouch agreements so long as the fundamental principle is not violated; and in this case, for the reason given by me, I am of the view that the said principle, viz., that bonus should be linked with profits has been adhered to in the agreement.